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Investing.com -- Trex Company Inc. (NYSE:TREX), the leading manufacturer of wood-alternative decking, reported second-quarter results that exceeded analyst expectations, but shares fell 3.6% as investors focused on margin pressure and weather-related challenges.
The company posted adjusted earnings of $0.73 per share for the second quarter, beating analyst estimates of $0.71. Revenue reached $388 million, surpassing the consensus expectation of $377.57 million and representing a 3% increase YoY from $376 million in the same period last year.
Despite the better-than-expected results, Trex’s gross margin contracted to 40.8% from 44.7% in the year-ago quarter. The company attributed this decline to a revised inventory strategy that level-loads production facilities, resulting in lower second-quarter production compared to the prior year. Additional factors included costs related to production process changes for Enhance® decking boards, railing conversion costs, and start-up expenses for its new Arkansas plastic processing plant.
"Our prominent position in both the pro channel and home centers enabled Trex to deliver another quarter of sales performance that exceeded expectations," said Bryan Fairbanks, President and CEO. "This unique positioning is the result of decades of relationship-building with our channel partners."
For the third quarter, Trex expects sales to range from $295 million to $305 million with a projected 100-basis point sequential expansion in gross margin. The company reaffirmed its full-year 2025 guidance for sales growth of 5% to 7% and adjusted EBITDA margin to exceed 31%.
New products have been a key growth driver, with products launched within the last 36 months representing 22% of second-quarter sales, up from 13% in the same period last year. The company’s railing sales are on track to achieve double-digit growth in 2025.
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